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"Elective deferrals"


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I have so little contact with Governmental Plans that I'm unsure of what I think I know.

I have very little information to go on here, other than a brief conversation. The new director of a governmental entity, which has a 457 plan and a 401(a) profit sharing plan, wants to make elective deferrals to the profit sharing plan. He said his prior governmental employer allowed him to do this. That's the sum of the information I have at this point. His prior plan may possibly have been a grandfathered 401(k) plan.

Let's assume that the current 401(a) plan is post-TRA 86 and is not a "grandfathered" 401(k) plan.

I think the current plan could allow employee voluntary after-tax contributions, and that these would count against the 415 limit.

I think the current plan canot allow "deferrals" in the normal sense.

I think a governmental plan may provide for mandatory employee contributions, and "pick up" the mandatory contribution under 414(h).

Agree/disagree? Is there any basis for allowing "deferrals to a governmental 401(a) plan, including a money purchase plan, other than as I mentioned above?


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I agree, generally. Voluntary and mandatory contributions are annual additions as under a defined contribution plan; thus, they are not a 415 problem for a defined benefit plan. Mandatory contributions could be sticky depending upon the sort of government plan you are working with. Government employees often have contractual rights to a retirement plan. If the contract did not say mandatory contributions, they are not happening. Voluntary is the real option, but he will not like the after-tax treatment. You could also explore 457(b), not as secure for the employee, but perhaps more desirable for the employer.

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